for the Built Environment Construction Conference · Fall of the Bretton Woods system 1979 oil...
Transcript of for the Built Environment Construction Conference · Fall of the Bretton Woods system 1979 oil...
for the Built Environment Construction ConferenceFebruary 21, 2019
2FMI Corporation Copyright 2019
FMI provides consulting, investment banking and private equity services for clients serving the Built Environment. We leverage unrivaled
industry access and 65 years of client service to achieve transformational outcomes for our clients.
FMI Overview
FMI Consulting
▪ Strategy
▪ Leadership & Organizational Development
▪ Performance
▪ Technology & Innovation
▪ Signature Programs
▪ CEO Peer Groups
▪ Insurance Captive
FMI Capital Advisors
▪ M&A Representation
▪ ESOP
▪ Valuation
▪ Financial Advisory
6U.S. Offices
Canada (new)
66Years in Business
200Professionals
600+Annual Client Engagements
25+Annual M&A Transactions
FMI Investment Partners
▪ Private Equity (new)
We serve clients in all 50 states and Canadian provinces, as well as, Europe, Asia and South America
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Themes from Last Year’s Conference (Fall 2017)
National Construction Spending
▪ Residential spending outlook remained robust
▪ Non-residential spending growth expected to moderate to +1 to 2%
▪ Non-building structures to decline by as much as -5%
North Carolina Outlook
▪ Raleigh, Durham, Charlotte, Greenville, Asheville, Winston-Salem and Wilmington outperforming state Non-Residential average
The Trump Agenda
▪ Trump ‘bump’ slow to materialize – no progress on Infrastructure, Taxes or Healthcare
Industry Themes
▪ Technology and innovation beginning to impact the industry
▪ Baby-boomers are behind the curve on addressing succession
▪ Generational ownership transfers within family members declining
▪ Robust M&A activity across all sectors of the industry
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Where are we in the current cycle?
Total construction spending put in place (US)
Billions of constant 2009 dollarsSource: 2018 FMI Overview, Featuring FMI’s Third Quarter 2018 Construction Outlook
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400 1973 oil crisis
Fall of the Bretton
Woods system
1979 oil shock
Iranian
Revolution
Black Monday
DJIA loses 22.6%
9-11
Dot-Com collapse
Sub-prime mortgage collapse2008 financial crisis
Federal rate hike
Second since
2008
50-year median
what’s next?
▪ tariffs / trade▪ interest rates▪ global growth▪ existing home
sales▪ housing
inventory
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USMCA – will it be ratified?
Trans Pacific Partnership – U.S. out forever?
Iran
China – trade, debt, tariffs
North Korea
Tariffs – how many for how
long?
Democrats take the House
Interest Rates
Too Much Uncertainty for Too Long Leads to Inaction .... Which Leads to ...?
Venezuela
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Indicators / MetricsRecessions Considered
Correct Predictions
False PositivesPrediction Strength*
Flag/ Warning Timing
Risk Assessment/ Trending
Yield Curve Inversion 5 5 - High (100%) ~2-3 year MODERATE
New Home Sales 6 5 1 High (67%) ~1-4 year LOW/MODERATE
Unemployment Rate 6 4 - High (67%) ~1 year LOW
US Trade Balance (BOP % change) 6 6 2 High (67%) ~1 year MODERATE
Money Supply 7 5 1 High (57%) ~1-3 year MODERATE
Lumber Sales 2 2 1 High (50%) ~1-2 year MODERATE
MBS Held by Banks 2 2 1 High (50%) ~1-2 year MODERATE
Rental Vacancy Rates 9 4 - (44%) ~1-4 year LOW
Residential CPIP 6 3 1 (33%) ~1-3 year LOW
Stock Market Performance 3 2 1 (33%) <1 year LOW
Copper Price (Doctor Copper) 7 4 2 (29%) ~2-5 year MODERATE
Consumer Confidence (OECD) 8 5 4 Low (13%) ~1 year MODERATE
Heavy Duty Truck Sales 7 4 4 Low (0%) ~1-2 year LOW
Manufactured Goods, New orders 2 1 1 Low (0%) ~1 year LOW
US Trade Balance (values) 6 1 1 Low (0%) ~1 year MODERATE
Unemployment Claims 7 4 5 Low (-14%) ~1 year LOW
Predicting the next US recession
Predictive indicatorsSource(s): FMI analysis of multiple sources
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North Carolina Forecast Growth Rate (2019 to 2021)
Source: FMI MSA Forecast as of Q4 2018
nominal growth
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North Carolina MSA Forecast Growth Rate (2019 to 2021)
Source: FMI MSA Forecast as of Q4 2018
nominal growth
Total Put-in-Place
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North Carolina MSA Forecast Growth Rate (2019 to 2021)
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Asheville+ Transportation, Public Safety, Education
-- Multifamily, Improvements, Religious
Burlington+ Transportation, Public Safety, Education
-- Multifamily, Religious, Lodging
Charlotte+ Transportation, Conservation and Development, Public Safety
-- Multifamily, Improvements, Religious
Durham+ Transportation, Public Safety, Education
-- Multifamily, Improvements, Single Family
Fayetteville+ Conservation and Development, Water Supply, Highway and Street
-- Religious, Lodging, Amusement and Recreation
Goldsboro+ Conservation and Development, Water Supply, Highway and Street
-- Religious, Lodging, Amusement and Recreation
Greensboro+ Conservation and Development, Transportation, Water Supply
-- Religious, Lodging, Amusement and Recreation
Greenville+ Conservation and Development, Transportation, Highway and Street
-- Religious, Lodging, Amusement and Recreation
Top and Bottom Three by MSA (Forecast 2019 to 2021)
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Hickory-Lenoir+ Conservation and Development, Water Supply, Highway and Street
-- Religious, Lodging, Amusement
Jacksonville+ Transportation, Public Safety, Education
-- Multifamily, Improvements, Sewer and Waste
New Bern+ Conservation and Development, Water Supply, Highway and Street
-- Religious, Lodging, Amusement
Raleigh+ Transportation, Public Safety, Education
-- Multifamily, Improvements, Religious
Rocky Mount+ Conservation and Development, Water Supply, Highway and Street
-- Religious, Lodging, Amusement
Wilmington+ Transportation, Public Safety, Education
-- Religious, Lodging, Sewer and Waste
Winston-Salem+ Transportation, Public Safety, Education
-- Multifamily, Improvements, Religious
Top and Bottom Three by MSA (Forecast 2019 to 2021)
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Industrialization and Digitization of the Construction Industry
In the
marketplace
And among
management
practices
Profiting from data analytics and real-time insights
Enhancing solutions by expanding across the value chain
Augmenting labor development to accelerate productivity
Shifting customer profile
Increasing building and infrastructure complexity
Nontraditional stakeholders and methods of competition
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A Dozen Enabling Technologies Driving Innovation and Transformation
Entrepreneurs and innovators from both inside and outside the industry are leveraging combinations of these
enabling technologies to create new business models and transform existing processes
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New competitors WILL NOT adhere to your legacy practices
Internet of Things
Process optimization via a network of
sensors and other devices for data
collection, monitoring, etc.
Advanced Robotics
Human augmentation and/or task
automation that enhances precision
and speed of delivery
Autonomous Vehicles
Machine-to-machine communication
and elimination of human operation
Iterative Manufacturing
Increased customization, creation of
unique products, and reduction of
waste
Artificial Intelligence
Replicating or replacing knowledge-
work tasks
Modularization/Prefabrication
Off-site fabrication and kitting
services
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Profiting from data and real-time analytics
Improved decision making
Greater Organizational Insight.
Building performance
Remote Facility Management
Problem prevention
Eliminating Conflict/ Reducing Rework
Data Analytics
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Different Impact Across the Infrastructure Spectrum
....
Vertical Integration /
Transformation of Business ModelFocal Point Solutions /
Transformation of Processes
Greater
ComplexityLess
Complexity
Materials Commercial Multifamily Lodging Education Light Industrial Heavy Civil Institutional Process
Disruption will look different the Built Environment and progress at different paces
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UpCodes has proprietary AI called Reinforcement Learning to notify you
when your building plans are going to result in code noncompliance. You
upload your plans to their app, and the system flags problem areas that
need to be revised before you start building. It is geographic-specific.
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Doxel uses a system of autonomous rovers and drones that take images and use
lasers coupled with building plans to assess the state of a building in progress.
Their system then uses a technique called Deep Learning to deliver this
information in a real-time dashboard that gives you percent complete reports. This
system also takes schedule and budget into account and lets you know when items
are overdue and influencing the critical path, and also visually assesses the dollar
amount of materials that have already been installed and compares that with your
budget.
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Grit takes schedules and creates a 4D workplan that allows you to see a virtual
model of the building as it’s built from the ground up, and then uses Artificial
Intelligence (machine learning) to recalculate the critical path if certain schedule
elements are not done in their original order. It then makes recommendations for
which other scheduled activities can be completed during the delay.
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TestFit.IO has developed a regenerative design platform that allows a user
to input building programmatic requirements such as total square feet,
number of apartments and rooms with various size requirements, number
of floors, number of elevators, number of parking spaces, etc. After
configuring basic building requirements and the footprint, TestFit runs a
series of algorithms that will produce the ideal design/layout. By point, click
and drag the design can then be manipulated/stretched and the design
parameters will automatically adjust as the building is being stretched. It
allows for early conceptual to schematic design of a building to allow for
more precise planning and budgeting. The TestFit design is intended to
serve as the basis for a design team to use as they proceed to DD and CD
level drawings. TestFit also applies 3D prototyping and shadow/lighting
elements to assess shape, site location and more.
https://youtu.be/mKkTJZ05bxI
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Trussmatic is a Finnish company that has brought together robotics, proprietary
software and process engineering. Trussmatic is a fully automated manufacturing
solution for the fabrication of trusses, wall and floor panels. Trussmatic is currently
in use for wood frame components but can also be used for metal components with
a quick switch of the heads on the robot. With Trussmatic, manufacturers can
automate the full Truss production line. General contractors can now vertically
integrate truss and wall panel fabrication into their services. The system is turnkey
with the associated robotics, production tables, conveyors, banding/bundling and
supporting technology all included in the Trussmatic offering.
https://www.youtube.com/watch?v=sQh2s2e0C7k
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Summary Thoughts
• We are at or near the top of the cycle....
• Has your good performance been a result of your innovation and
operational improvement or merely a byproduct of a strong market?
• Contractors don’t go broke due to lack of work....
• How are you leveraging lessons learned from the Great Recession
and coaching your next generation?
• Someone is definitely working to disrupt your sector and your role in
the industry
• You need to be thinking differently about your strategy, business
model, people and processes
• It’s great to be in North Carolina!
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As president and chief executive officer of FMI Corporation, Chris oversees the management of all FMI
businesses and services and leads the firm’s strategic growth efforts. Previously, Chris served as
president and senior managing director of FMI Capital Advisors, the firm’s investment banking
subsidiary, where he also led the firm’s utility infrastructure practice.
He works with owners, boards and management teams on strategic issues involving industry trends,
management, ownership transfer, and mergers and acquisitions. He is a contributing author to
numerous industry publications and media outlets and is an energetic and entertaining speaker on the
current and future impact of economic, technology and competitive trends on the industry.
Prior to joining FMI, Chris served as global financial services leader for an industrial company with
operations throughout North and South America and Europe, and he began his career in public
accounting with KPMG.
Chris has a Bachelor of Science in business with a major in accounting from Virginia Tech. He is a
licensed certified public accountant (inactive) in the state of North Carolina and holds FINRA securities
licenses 24, 79 and 63.
W. Chris Daum
FMI Corporation
223 South West St
12th Floor
Raleigh, NC 27603
Tel: 919.785.9264
Cell: 919.931.0444
E-mail: [email protected]
Website: www.fminet.com
W. Chris DaumPresident and Chief Executive Officer
Thank You